Do you travel the world working remotely? If you regularly change your residence, you're likely a digital nomad, which makes your tax returns a bit more complicated. In this article, we'll explain how taxation works for individuals who regularly change their country of residence.
Who is a digital nomad from a tax law perspective?
Polish tax regulations do not define the concept of a digital nomad – this term is still part of everyday language. In our understanding, A digital nomad is a person who works remotely and is not tied to one place. Typically, such people stay in one place for several months, moving between countries and sometimes even continents.
Taxes of digital nomads, at least in Poland, depend on other factors, such as their tax residence, the place of actual provision of services,
It is worth noting that the laws of many countries, including Croatia, Greece, Spain, the Netherlands, Iceland, Portugal, Italy and the United Arab Emirates, already precisely regulate the legal situation of such persons, for example by introducing special visa programsAlthough these are only our guesses, we assume that Poland will also address these issues in the future.
What is tax residency, how to obtain it and what does it mean in practice?
Tax residence can be understood as a person's tax affiliation to a given country. Therefore, if you are a Polish tax resident, you are assumed to be subject to unlimited tax liability in this country. In other words, all your income, regardless of where it is earned, is taxable in your country of residence.
Importantly, however, non-residents also have to pay. In their case, there is a so-called limited tax liability, which, in simple terms, means that in a given country, only income earned there is subject to taxation. Typically, this taxation involves collecting withholding tax (WHT).
In Poland, the tax residence of individuals is defined in Article 3 of the Personal Income Tax Act. According to this provision, an individual is considered a Polish tax resident if:
- Has a centre of personal or economic interests in the territory of the Republic of Poland, or
- Stays in the territory of the Republic of Poland for more than 183 days in a tax year.
You only need to meet one criterion to be considered a resident under the Act, and therefore subject to unlimited tax liability. Spending an entire year outside Poland may not be enough if this is where you have your family, bank account, apartment and most of your assets. The situation in which a person remains a Polish tax resident despite staying abroad for a longer period of time is well illustrated by the following story:
Agnieszka works as a programmer and invests in cryptocurrencies, so she decided to move to Portugal, where, after meeting certain conditions, there is zero tax on profits from the sale of cryptocurrencies. Despite the move, she still works for a Polish company, regularly visits her family in Poland, and plans to move back to Poland from Portugal after about a year – she has no future plans for the country.
In our opinion, the woman in this example would still remain a Polish tax resident. Staying in Portugal without a plan to return, working for a local company, or selling her apartment in Poland would significantly change her situation, but it's still worth remembering that Tax authorities usually approach the examination of tax residence status in a very individualized manner.
Can you have more than one tax residence?
Let's make this clear – Under national law, you can be tax resident in multiple countries simultaneously. In most cases, due to applicable double taxation treaties and their conflict of law rules, you will ultimately be tax resident in only one country. However, this will not exempt you from paying taxes in more than one country.
For example, if you are a Polish tax resident only and you work in France for a French company, all your income is subject to taxation in Poland, but the income earned in France will also be subject to taxation in that country.
There may also be situations in which you meet the criteria for being considered a tax resident of two countries – for example, because you spend 250 days a year in Greece, but your center of personal interests is in Poland. In such cases, the aforementioned double taxation treaties and tie-breaker rules come into play – these are the rules that determine which of the two countries should be considered your country of tax residence.
Tie-breaker rules may vary depending on the treaty between the two countries, but generally, the rules adopted by the OECD in Article 4 of the Model Convention apply. For individuals, we check the following:
- Permanent residence – this refers to a permanent, accessible apartment or house,
- Centre of vital interests – understood as closer personal and economic ties,
- Usual place of residence – the place where the taxpayer stays most often or permanently,
- Citizenship,
- In the absence of the above, the tax authorities make a decision in agreement.
The above test works in a cascade manner – first we decide on the permanent place of residence, and only if there is no solution in this respect do we reach the next step.
What is a double taxation treaty?
As a digital nomad, you should definitely know what a double taxation treaty (DTT) actually is and how its provisions affect your tax situation.
As mentioned, double taxation treaties (DTTs) apply especially when, under domestic law, both countries recognize the same person as their resident. Furthermore, DTTs regulate a number of other issues, such as the taxation of dividends, royalties, royalties, and corporate profits.
These agreements, although based on the OECD model, may differ – contracting states may introduce individual provisions, perhaps stemming from the nature of their economic relations. This is particularly evident when comparing agreements concluded several decades ago (e.g., between Poland and the US) with relatively new ones, such as those between Poland and Brazil or Poland and Georgia.
The general rule for hired work is that remuneration may be taxed in the country where the work is actually performed. Exceptions to this rule usually occur in situations where the employee stays in a given country for less than 183 days, the employer is an entity from a country other than the country where the work is performed, and the remuneration costs are borne by an entity other than the employer's establishment in that country. In practice, this applies to posted workers or digital nomads. However, this regulation does not always apply, so before moving to another country while working remotely, make sure that the tax regulations won't surprise you. If you have any doubts in this regard, you can always contact contact specialists in the field of taxation of digital nomads.
What form of business should you choose?
Choosing a business model is crucial for digital nomads. In addition to tax considerations, considerations include ease of use, legal risk, and the costs of running a business.
For short-term digital nomadism within the European Union, living abroad doesn't significantly impact your decision-making process – the profitability of various forms of business will be comparable to running a business in Poland. However, if you plan to spend several months or a year abroad, the situation becomes more complicated – risks arise similar to those you would encounter running a business outside the EU, for example, in England or Turkey.
It's worth noting, however, that when running a partnership, in addition to difficulties in determining your tax residency, doubts may also arise regarding the company's residency. Generally, this residency is related to the place of effective management. Importantly, in some cases, permanent establishment risk occurs, significantly complicating tax settlements. Therefore, if you're an IT specialist, lawyer, digital creator, or other freelancer selling your services to one or more clients, a sole proprietorship (JDG) will likely win out over a partnership, primarily due to its simplicity and significantly lower operating costs.
Choosing a business form is obviously a complicated issue, so if you think it would be worth setting up a company but you have doubts, contact us – we will analyze your entire situation and advise you on choosing a safe and effective solution.
What about ZUS?
Let us emphasize – social security is regulated separately from taxes. For digital nomads in the European Union, the rule is that a self-employed person may be subject to the social security system in their home country, but for no longer than 24 months. After this period, the entrepreneur enters the social security system in another country.
What is important, Before leaving, you must obtain an A1 certificate from ZUS. This document will confirmthat while you're self-employed, you'll be covered by the Polish social security system. Obtaining this document isn't difficult, but it requires demonstrating that your business will be similar in nature to what you performed in Poland. The services you provide don't have to be identical—what matters is their overall specificity. Therefore, if you've worked as a backend developer and now plan to focus on code testing or application implementation, you'll receive an A1 certificate. However, if you're transitioning from IT to window installer or electrician, you won't be able to take advantage of this opportunity.
What about VAT?
VAT is another issue that you, as a digital nomad, cannot ignore. First and foremost, it's important to emphasize that Your tax residence for PIT purposes does not automatically translate into which country you should pay VAT in. For the purposes of this tax, you should determine place of supply of services, if necessary, register for VAT-EU and analyze possible obligations arising from the regulations in force in the country of residence.
Hiring Digital Nomads – These Are the Risks You Need to Know
When a digital nomad is employed under an employment contract, their employer is subject to a number of formal obligations. While some risks associated with failure to meet these obligations are minor, others pose significant consequences.
Payroll taxes
Naturally, if your employee permanently resides in another country, their income will most likely be subject to taxation abroad. This means you may be required to register as a personal income tax payer in another country. A similar issue also arises with social security contributions.
Permanent establishment abroad
Although employing one person with a low level of decision-making power does not pose a high risk of establishing an establishment, the presence of several people in one country, especially if they interact with customers from that location or make important decisions for the organization, may be dangerous.
In the update 2025 Model Convention, the OECD clearly statedthat the mere fact that an employee uses their home does not automatically create a permanent establishment. However, it is worth being aware that exploiting an employee's presence in a given country, for example by engaging them to represent the employer before local suppliers and customers, may raise concerns with tax authorities.
Local labor law
Let us also note that although when concluding an employment contract, the parties have a certain freedom regarding the legal order that will govern their cooperation, in accordance with EU Regulation No. 593/2008, the choice of provisions cannot result in depriving the employee of the protection resulting from mandatory provisions in a situation where the parties have not made such an agreement. In practice, If your employee permanently resides in a country where the labor law is clearly more favorable to him, there is a real risk that the contract you concluded under Polish law will be questioned.
The main differences include notice periods, the number of vacation days, employee documentation, information obligations and occupational health and safety regulations.
Cybersecurity, confidentiality, insurance
Although data security issues are not related to taxes, they are also worth highlighting. Hiring an employee residing outside of Poland may constitute a violation of the precautionary principles, which, in the case of regulated professions, may arise directly from the provisions of the Act. This stems from the dramatically increased risk of confidential information leaking, for example, through the use of public Wi-Fi networks.
It's also not uncommon for employers' liability insurance to be ineffective if an employee causes damage while abroad. While insurance without geographical exclusions is available, it's usually significantly more expensive.
What should a digital nomad watch out for when deciding to run a business?
Unfortunately, taxes aren't the only concern for digital nomads. Besides tax authorities, banks can also be inquisitive, inquiring about tax residency due to regulations in force at their offices. AML regulations, including those concerning confirmation of residential address, may cause serious difficulties when opening a bank account.
It is also worth taking into account difficulties in dealing with official mattersWhen planning a long-term presence abroad, especially far from Poland, it's worth appointing a representative who could represent you before authorities, manage your property rentals, and represent you in court. It often happens that one such person isn't enough, especially if your financial situation is complex.
Also, remember to document your locations. For the purposes of any disputes with Polish tax authorities, evidence of your presence in a given country will include:
- Airline and bus tickets, fuel receipts at gas stations,
- Utility bills, apartment or hotel rental fees,
- Bank account statements, especially if they document transactions made with a payment card,
- Contracts documenting your employment.
At the same time, it is worth mentioning immigration regulations. Compliance with applicable tax regulations does not determine the legality of your stay in a given country. Technically speaking, working remotely while on a tourist visa may be considered illegal, exposing you to very serious legal consequences. Therefore, when crossing a country's border, you must take care not only of taxes but also of immigration law.
Summary
We hope our article helped you understand the basics of digital nomad taxation. If you're planning a move abroad and want to ensure tax security, we strongly recommend consulting an experienced lawyer – when it comes to international taxes, small details can lead to significant tax bills.
Also remember that Visa and tax regulations change constantly. Before moving, familiarize yourself with the current legal status.
